__economic thinking about sports__

Ban Holidays!

2010 October 28

by Skip Sauer

Among the sports-related economic nonsense that gets tossed about in the media are calculations of “lost productivity” associated with things like the NCAA Men’s Basketball Tournament. Here’s the latest instance, on one of the great days in Australian horse racing, the Melbourne Cup:

While Melbourne Cup day is a public holiday in Melbourne, time taken off by workers across Australia could be costing the nation about $1 billion in lost productivity, according to a new survey.

The survey, by recruitment firm Ranstad, found that almost half the employees it surveyed took more than three-and-a-half hours off work on Melbourne Cup Day.

Australian Bureau of Statistics figures indicated about 11.2 million people were currently in full-time work in Australia, earning on average $31.40 an hour.

“If our results are representative of Australian businesses, we could be losing about $1 billion in the afternoon of the Cup,” Ranstad chief executive Deb Loveridge said in a statement.

The figures are based on the survey’s calculations that there are about 31 million hours in lost productivity on Cup Day.

The problem with these calculations is that we don’t live to work, we work to live better! Economic theory interprets the $1 billion in lost output associated with the Melbourne Cup as a lower bound on the value that Australians place on the occasion. Otherwise they wouldn’t choose to forgo work and take in the races. Economics may be referred to as the “dismal science,” but in this case a proper understanding of economics reveals that the alleged cost, or loss, or what have you, gives us a sense of how valuable the Melbourne Cup is to the many people who take time away from work to enjoy it.

If you read the newspaper story, it seems that the creator of the figure, Ms. Loveridge, gets the idea that the benefits exceed the costs. But selling papers requires a negative spin I suppose, hence the title of the piece: “The race that costs the nation.” Ugh!

Hard to beat Mark Twain’s observation after attending the Cup in 1895:

“Nowhere in the world have I encountered a festival of people that has such a magnificent appeal to the whole nation. The Cup astonishes me.”

It is hard to explain the appeal of the Cup to non-Aussies. It may not be the world’s richest race, but where else do first grade teachers stop the class so the students can watch and barrack for their nag to win?

I know that in every office I have ever worked in we worked for 4 hours straight with no chit chat or goofing off until it was time for lunch. Then we took 30 minutes, no more for lunch before working for another 4 hours. Never made any unnecessary phone calls or surfed porn on the internet. All e-mails were strictly business related and anytime someone started to tell a joke they were told to be quiet and get back to work. If anyone went to the lunch room for coffee they added that time to the end of the day so they could give an honest 8 hours of work.

I assume Ms. Loveridge works in a similar office and is why she is so sure of the lost productivity.

Ironically enough Skip, Melbourne’s seven Universities do not get the day off, as they are tied to the Federal system (and thus not guaranteed state holidays). Threfore, the race may ‘stop the nation’, but not us poor academics:-(

PS: I will sneak out of the office to the University Bar at about 1520 AEST.

I read that two of the contestants, including last year’s winner and this year’s likely favorite, prepped in a 1 1/4 mile stakes race on Saturday, just 3 days before “the big one” (the favorite won in a canter). Trainers used to do that in America — hence the “Derby Trial”, run a week prior to the Kentucky Derby. But nowadays they want to give their horses a minimum of three *weeks*, as opposed to three days between races.

I like the Australian way, myself. The American thoroughbred has little stamina and no longevity, and it has ruined the sport.

Just got back to work from the local pub next door( 3 1/2 hours off), watching the Cup and drinking beer, the biggest true Australian tradition we have.

Apart from not putting a price on the value of this to us, the economists are so wrong in regards to productivity it astounds me. GDP, the measure of the nation’s productivity, is calculated by adding up total income not what is produced. This is because it is the same thing but it is easier to total up income.You can add up what society makes or what you sell it for, they are equal.

If people are being paid while they are watching the Cup there is no effect on productivity as a whole. A specific example: while I was at they pub not working they had 4x the normal staff cooking lunches, serving drinks etc. I will catch up on the work I ignored but those extra staff have increased productivity and will now have more money to increase others’ productivity as the spend the income.